Have Loyalty Programs Gotten Lazy? They Could Make More Money and Benefit Members at the Same Time

This piece by Mark Ross-Smith, who until recently was head of the Malaysia Airlines frequent flyer program, is chock full of insights. He lays out a number of things that most frequent flyer programs aren’t doing, costing them real money, because they’ve gotten lazy — focused on little besides the revenue stream they’re earning from co-brand credit card deals.

  • They don’t even drive program signups. I was surprised last year buying an American Airlines ticket for my in-laws that it’s not even possible to join the AAdvantage program during the ticket purchase process.

    Consider adding an inducement for new members to join the program (eg: Air Asia offers MYR 10 off the flight ticket cost when joining as an Air Asia Big Member), or a points challenge to fast-track to a meaningful points balance.

  • Lack of knowledge about potential business from members. How much of a customer’s wallet share does an airline get? Are dormant customers flying other airlines – but could be brought back with incentives? What kind of revenue can be raised by getting members to spend for the next status level? Ross-Smith says American earns $50 million from their status buy up offers.

He even suggests that there’s tons of value being left on the table between airline and bank partners. Does the bank let the loyalty program know when a customer cancels their card? Are loyalty members being leveraged for a bank’s private client or high net worth investment program?

[D]o you score members based on their ability to spend more? What if you knew a non-elite frequent flyer had 10million American Express MR points? That is potentially up to USD $50,000 revenue which could go to your loyalty program, or a competing program – at a moments notice.

Negotiating bank-wide agreements which don’t impose upon co-brand agreements can be hugely beneficial in extracting more value from the bank partner. Consider unique value propositions to help the bank achieve its goals. Does your loyalty program participate in private banking rewards (usually not available to the public) for banks to grow customer investment?

Virtual bank partnerships, ewallet and alternative payment, loans, mortgages, personal financing, bank retention data sharing… there are A LOT of opportunities with banks to build deeper business relationships.

He mentions “[a]ligning co-brand with status” as a way to get members to take the credit card but I think there’s something even more fundamental here. In a future where interchange rates fall, banks won’t be spending as much to incentivize transactions on their cards. How can cards be designed in the future to drive engagement without being as costly? I don’t think any cards in the world ‘ride the rails’ of their airline or hotel partners as well as the Frontier and Hyatt products, using the status benefits of the underlying program to promote spend on the product.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. @ Gary — Loyalty programs, especially Delta and Marriott, hate their members. The feeling is mutual.

  2. Concur with Gene and Alan above. My current goal as a credit card loyalty program member is to use up those miles and points, dump most of the credit cards, and let my wallet decide on which travel route to take. Having experienced the “good old days” of being treated very well as a loyalty program member, and now experiencing almost no benefit from participation, am looking forward to greater economic freedom.

  3. These programs have little to do anymore with loyalty and rewards. It is now largely driven by greed: the program managers are no doubt mistakenly incentivized on revenue rather than customer acquisition/retention and they easily maximize revenues by just selling the miles to brokers, also sometimes called CC companies; the customers in the US are getting bombarded with bonuses, multiple points per $ etc etc to get them deeper into debt, all those cheap miles have an inflationary impact on redemption tables, and the rest of the world, which does not have access to millions of miles, suffers, and doesn’t bother anymore about the miles game.
    It’s like to Roman Empire, collapsing from within driven by greed.

  4. Gene said: “Loyalty programs….hate their members. The feeling is mutual. [Edited]” It made me laugh. Universal truth right now. Why? I have three theories: (1) “Delta and Marriott” are sharing view of members with other loyalty programs through imitation and manager’s changing jobs. (2) People that chose loyalty managers jobs have hidden lemming genes. Lemmings as you know are well know for periodically committing mass suicide. (3) Virus. Ok, the reason (1) is serious, (2) and (3) are jokes.

  5. I get the feeling that it’s true that loyalty programs hate their members and too often airlines seem to hate their passengers too . I have read that Delta and American specifically make a lot of money from cobrand credit card agreements . I believe the figure for Delta in 2017 was 3 billion dollars . The ‘mystery’ awards charts are a symbol of this disdain .

    Mark Ross-Smith asks some excellent questions . Why do they not make awards more appealing , more beneficial and easier to use ? Why not treat their loyalty program members better and encourage more people to take part? Why not offer some incentive for even the very occasional customer?

    This is the era of lowered expectations .

  6. I have too many credit cards for now. I’m good. That is, until American Express hits me up for an “AMEX Black Card.”

  7. I am researching how my IHG points went to zero. I believe it was lack of use for 1 or 2 years, but to wipe out my balance, what are they thinking? Now I have no incentive to add to my balance by staying in their property when HHonors or Hyatt or SPG iis available. Did they need the points back for something? Luckily it was not a lot like less than 20,000, but combined with their telemarketers calling relentlessly to visit their timeshare for $200 for family of 5, and taking my points, I think I will only use them as a last resort.

  8. Here’s one that’ll leave you scratching your head. I received an “Exclusively For You” promotion today from Marriott Bonvoy whereby they want me to earn elite status faster by offering double elite night credits. Why in the world would Marriott think a Lifetime Titanium Elite needs double elite nights is beyond me.

  9. In Europe the interchange fees have been pushed to practically nothing. So there are very few lucrative credit cards which offer many points for low spend: like 3 points per dollar. The banks can’t make any money because there is no spread for them. So points have to be earned the old fashioned way by actual flying.

    If this happens in America the airlines cash flow from selling points will dry up and they will have to make money by actually flying people and, maybe, being nice to their customers

  10. Thanks @Gary Leff. Very good point. Didn’t think of that.

    If there is one thing I’ve learned from you though is that Ambassador status at Marriott is not worth the $20K spend. Maybe back in the day of Starwood, but definitely not with Marriott’s current customer service issues.

  11. Well focusing on just the airlines, the problem with their loyalty programs is the same problem they have in general..they are so tied up with the government, they think they are the government and they act with the same level of customer service

  12. Simple tweaks could pick meaningful low-hanging fruit that could really boost the bottom lines of airlines and hotels. Maybe then they wouldn’t need to nickel and dime us for conveniences that used to be free.

  13. Hmm, when as a non-status flyer, you fly a trip to Europe or Asian and receive 2-3K miles, why would anyone be loyal? This is common for say retirees. When one retires and they were road warriors and now fly occasionally, that is what happens. Not everyone has a lifetime status.

    Ross-Smith is totally right. The airlines and hotels are leaving revenue on the table because of shortsightedness and greed. The people who head these programs were never frequent fliers/guests so they do not have the mindset. They do not understand what motivates customers to come back.

    But I am of a general opinion that most managers of most American companies only see the bottom line and only see increasing some cost to make money. They are clueless!

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